Record Pessimism About Retirement

That's the finding of a new survey just released by the Employee Benefit Research Institute, which asked 1,258 respondents how confident they felt that they'd be able to afford a comfortable retirement.

Their pessimism set a new record for the 21-year old annual survey.

Twenty seven percent declared themselves "not at all confident" they'd be able to retire comfortably, up from 22 percent the year before. Only 13 percent said they were "very confident" of being able to.

Jack VanDerhei, research director at EBRI, says what surprised him most--in light of the stock market's rebound in 2010--was the 5 percent increase in "not at all confident" responses. The increase was not uniform but varied according to income.

The increase in the total percentage of workers not at all confident appears to be largely the result of a loss of confidence among those who have less than $100,000 in savings, the report found. That percentage increased sharply among people with savings of less than $25,000 (43 percent in 2011, up from 19 percent in 2007) and between $25,000 and $99,000 (22 percent in 2011, up from 7 percent in 2007).

Worker confidence appeared to be holding steady in the following areas: having enough money to pay for basic expenses during retirement; having enough to cover medical expenses; having enough to afford long-term care. How could people feel comfortable about these components of retirement and yet be so pessimistic about retirement overall? Easy, says VanDerhei: They don't want to have to settle for the basics. "They say, 'I want the golden years I've see in all the advertisements.'"

How are today's would-be retirees hoping to achieve that goal? By working longer and by changing the way their money is invested.

Nicole Francis, a certified financial planner in New York City with 26 years experience, says of clients in their 60s: "They've really reassessed their attitude toward risk since the meltdown of a few years ago. They're reassessing their risk even if they're not planning on retiring." She's seeing her clients put more money into fixed income investments, "even among people who up to this point have invested in stocks." What they want isn't a killing in the market; it's a safe and steady stream of income, even at the cost of a lower return.

One of her clients, Eileen (who prefers that her last name not be used), is well into her 60s. She likes her job as an administrative assistant for a private school and intends to keep working as long as she can. "It may come to a point," she says, "where I'm physically unable to keep working---but I'm nowhere near that now."

The volatility of the real estate market has forced her to rethink retirement. "I always saw my weekend country home as a way out," she says. "I could sell it when I had to. Unfortunately, its value has significantly depreciated in recent years. People aren't buying second homes." She's been moving money into bonds, out of stocks. She's also paid off debt, which she figures gives her a better return on her money than if the same funds were in a bank earning 1 percent.